According to consulting firm Bain & Company, the fear of Chinese companies starting to open on the American Stock Exchange will ultimately benefit China.
John Fildes, a professional partner at Bain & Company, said that this is because these companies want to list in Hong Kong in order to attract international investors and attract capital into the market.
After making two decisions, the New York Stock Exchange (NYSE) will delist the three Chinese telecom giants. On Thursday, it finally stated that it would delete shares traded in the United States by China Telecom, China Mobile, and China Unicom on the grounds that President Donald Trump signed an executive order prohibiting the United States from conducting transactions against Chinese companies that have ties to the Chinese military. investment.
Fields said: “If it does happen, it will undoubtedly benefit these companies from listing in Hong Kong.”
The Hong Kong-listed stocks of four Chinese telecommunications companies plummeted by 7% to 11% on Thursday after the New York Stock Exchange announced.
On Monday, January 4, 2021, the American flag outside the New York Stock Exchange (NYSE) in New York, USA.
Michael Nag | Bloomberg | Getty Images
Fields also told CNBC’s “Asian Road Sign” that US laws that require foreign companies to comply with US audit standards have driven many Chinese companies to list elsewhere.
He said: “But this is all in China’s interest, because these companies will be listed in Hong Kong for a second time.” “If they do delist in the United States, then international investors will be able to enter these companies through their listing in Hong Kong. “
“Extremely attractive” Asian market
Fields said it wasn’t just the “bumps” in the US that pushed the company to go public in Asia. Even with “large amounts of capital” raised in the United States, the Chinese and Hong Kong markets have become more attractive.
He said: “We see the growth of the Shanghai star market and the relaxation of some regulations around Shenzhen’s Growth Enterprise Market, which makes domestic listings more attractive.”
The star market and the ChiNext are NASDAQ-style technology-focused sectors. As part of China’s financial market reform, they have relaxed regulations.
He said Hong Kong is now also “more attractive”, noting that the exchange allows companies to be listed with weighted voting rights. This means that certain stocks have more voting power than others. Bourses in Asia introduced a system implemented in the United States to compete for IPOs.
He added: “Hong Kong will definitely be supported by these new regulations.” “Shanghai and Shenzhen are also making themselves more open and attractive to technology stocks.”
He said: “The Asian market is very attractive and there is a lot of cash around.”
Felds said that investors are turning to the stock market in a low interest rate environment, and the IPO activity in 2020 is “extraordinary” globally.
This momentum is likely to continue into this year. He said: “At present, we have no real reason to believe that this situation will not continue until 2021.”